Digital Wallets – Apple Pay is NOT a Method of Payment

Most eCommerce companies see Apple Pay as a new method of payment - yet another hat in the alternative payments ring.

What these companies are missing, however, is that Apple Pay isn't a method of payment, and it is most certainly not reinventing the wheel when it comes to transaction processing. When combined with an iOS application that has a strong customer acquisition strategy and mobile-optimized design, Apple Pay is an authentication tool, and it is a conversion tool.

When you look at an alternative payments product like PayPal or Bitcoin, you see a technology offering that seeks to circumvent the existing payments ecosphere, and offer a retailer access to a new customer demographic that was unsatisfied with the incumbent payment vehicle (usually the four major card brand networks). Instead of introducing a new payment method to an arguably crowded market, Apple has set out to optimize how its users pay with existing methods of payment – in this case, American Express, Visa, and MasterCard.

Provided an issuer has implemented the proper risk controls, Apple Pay allows a cardholder and a bank to communicate to approve the device for future payments in a considerably lower risk process than ever before. Furthermore, Apple Pay can generate an issuer’s signature to accompany payment credentials shown to an iOS application, allowing the app to finalize a transaction knowing that it came from an issuer-approved device. In these ways, Apple Pay augments the security of transaction processing, but does so through existing pipelines.

Additionally, Apple Pay augments the way in which a consumer processes payment during in-app checkout. The more you can push payments to the background of your customer's experience, the more focus you can keep on the strength of your product. Once customers are in the checkout process of your website or mobile application, the last thing you want them thinking about is whether they are inputting the right billing address or if they mis-typed their 16-digit credit card number. Using the iPhone’s TouchID biometric scanner, Apple Pay can simultaneously confirm the cardholder’s identity as initiating a transaction, as well as provide all necessary cardholder data – email, shipping address, payment credentials – directly to the iOS application to process payment. According to Adobe Digital Index, digital wallets have shown to increase cart completion rates by 10% - when all it takes is a thumbprint to place an order on a mobile device, it is easy to imagine this effect on conversion.

So there you have it – as you consider Apple Pay as an addition to your mobile strategy, stop thinking about it as a new method of payment, and more as a tool to augment your existing methods. Reducing risk and increasing conversion are goals that most companies can agree on – why not let Apple Pay focus on them for you? Tune in for the next installment of our Digital Wallets blog series, when I’ll focus on products like Android Pay and CurrentC; where they sit in the payments value chain, and the differences between them.